Heidrick & Struggles International, Inc. has issued its Hedge Funds Industry Trends 2009, the company announced. The report details hedge fund search and recruiting trends, as well as compensation activity and salary and bonus ranges, for the first three quarters of 2009 as funds have sought to re-launch and re-brand themselves in the wake of the economic crisis.
Highlights include:
– Competition for talent: Hedge funds are now competing for talent with endowments, foundations, traditional asset managers, and asset management and proprietary trading desks of banks.
– Bank brain drain: The summer of 2009 was active in fund launches and hiring as pay and trading constraints have driven a number of senior traders from banks to launch their own funds.
– Where the jobs are: Due to an asset-building frenzy, there is a greater demand for experienced sales and marketing professionals as funds hope to capture sidelined assets, new assets, and assets from poorer-performing funds.
– Push downward on compensation: With more fund closings expected this year, and about half of funds still near their high-water mark or underwater, compensation bands are broken, and, on average, 2009 will be a down year for compensation.
– Proprietary hedge fund roles increasing: While prop desk trading and hiring was dormant in Q1 and Q2, Q3 saw increased activity, according to candidates interviewing for these roles.
Additional observations include:
– Funds jumping on top talent: In 3Q 2009, employers who had held onto the viewpoint that the talent pool will only get richer over time were more active in hiring and taking advantage of the available talent. Except for funds with $2 billion or less that are still trying to reach their high-water mark, there is no more fence-sitting when it comes to picking up the top talent, says Claude Schwab, a partner at Heidrick & Struggles and one of the reports authors. The greatest candidate opportunities are in credit, distressed, equity long/short and macro, given the dislocation in credit markets and preference for more liquid assets.
– Guarantees much less likely than in the past: But they still exist for the best senior level marketing talent, especially in instances where a candidate has multiple offers, says Schwab. The strongest 5-10% of senior marketers are securing significant guarantees, with another 20-30% of mid-to-senior level hires securing minimum floors. But, in general, factors other than compensation are having tremendous influence on individuals for all roles.
– Hedge fund asset-building frenzy: Q3 saw fresh money with a high-water mark re-set from sidelined capital and endowments, sovereign wealth funds, and retail.
– Slowdown in certain recruiting areas: By Q3 2008, the competition for HR and recruiting talent among hedge funds had slowed considerably, and by Q2 2009 the number of dedicated HR/recruiting personnel within hedge funds had significantly contracted. Many funds laid off all but their most senior HR/recruiting personnel, and, in some cases, valued HR/recruiting personnel have shifted into other roles (such as investor relations).
– Not much fee compression: Hedge fund fees are not changing materially for survivors who are performing well. Changes for the hedge fund business model are generally incremental, not revolutionary, regarding fees, says Schwab. There are more substantial changes around liquidity, leverage, redemptions/gating, and transparency, and key decisions are being made regarding outsourcing versus self-administration of back- and middle-office processes, especially in attempts to attract and keep investors.
– Dramatic fall-off in size of launches: There was a shift from 2008s multi-billion dollar launches to 2009s hundred million dollar launches. The largest fund launch in 2008 was bigger than twenty largest fund launches in 2009 combined, says Schwab.
D.C.